Socialism Vs. Capitalism

[barnhart]

I suspect if you measure federal spending per capital, Ken is right.

[Ken]

I suspect if you measure federal spending per capital, Ken is right.

It is also generally true if you measure state spending. It certainly true here in Washington where the state spends more per capita on rural counties than urban counties.

[PetrChelcicky]

But in some parts of economy, government and private enterprises competed and the government lost. The most debated case was, of course, prices - and the market was a lot better in determining prices than the government. Then, were the governments really so much more successful in infrastructure? Afaik the United States were just the country where a lot of bridges, roads or railroads were built by private enterprise.

We Germans are in a rather interesting condition beacuse so much of our socialism was rightwing socialism - not only the Nazis, but far before them conservative professors (Kathedersozialisten), who promoted above all "gas-and.water-socialism" (i.e. communal enterprises to provide gas and water to the townfolks). But just that part of communal activities has been "privatized" again, not so much because of "neo-liberal" propaganda, but simply because the state did not really want to be responsible for unpopular decisions (like wage-lowering).

Last not least a lot of regulations who were directly forced upon the producers (like, farmers) and the consumers, have been extremely unpopular; nearly everyone was glad when the "cards" for groceries, clothes etc. were abolished.

I accept that this all is impressionistic and doesn't add up to a general conclusion. I am quite content to live in a mixed economy and only get angry when people think that problems in the system automatically require a more-government solution, as if a less-government solution did not exist!

[Ken]

The reality is that there are some parts of the economy for which the free market is clearly superior and there are some parts of the economy for which the public sector or public investment is clearly superior and necessary.

The difficulty sometimes, is in discerning the difference.

Communications, for example. Cell phone technology is advancing at light speed and there is tremendous private sector innovation. In just 15 years technology has advanced incredibly. The first iPhone only came out in 2008 if I recall. It is also an area of the economy where public interest and private profit are largely aligned. Once a cell phone provider builds out a network it is to their advantage to recruit as many users as possible and come up with pricing schemes that attract people from every economic stratus of society. Even homeless people have cell phones these days. You can find some cheap used cell phone for very little money and find some cheap pay as you go plan and have your own smart phone. The government could not match that. But the government does still have a role in regulating spectrum so that AT&T and Verizon do not interfere with each other's signals. Agriculture is another area where the private sector is clearly superior. When collective government farming is tried it usually fails, or fails to match private sector efforts.

However there are sectors of the economy that the private sector largely fails at. Or at least fails to meet our societal objectives. Medicine, for example, and specifically health insurance. In the US, prior to the Affordable Care act (Obamacare) it was virtually impossible for sick people and people with pre-existing conditions to get health insurance. There was zero financial incentive for private insurance companies to insure sick people and a huge financial incentive for them not to. Why would an insurance company want to take on a customer who is going to cost them $500,000/year in expensive chemotherapy? They wouldn't. They do everything they can to avoid such customers in contrast to communications where cell phone companies want to add as many customers as possible once their systems are built out because it costs them very little to do so. The government solution was to create large insurance pools, subsidies, and mandates (combination of carrots and sticks) to address that market failure. Medicare and Medicaid are two government-run programs designed to address different market failures in the health care system, insuring the elderly and insuring the poor. Neither of which private insurance wanted to do. Germany tackles the same issue somewhat differently with universal health care that is a combination of private and public options that is more highly-regulated and comprehensive than what exists in the US.

I am actually a big believer in market-based solutions when they are appropriate. In my prior career before teaching I worked for the government designing and implementing market-based solutions to fisheries management in Alaska. Specifically individual fishing quotas (ITQs) and private fishery cooperatives. That work was actually opposed by most liberal environmental groups like Greenpeace who opposed the "privatization" of public resources. But they led to a much safer and more economically efficient fishery. I believe the same thing about other issues such as housing where I see things like zoning laws that artificially constrain and drive up the cost of housing into the stratosphere in places like San Francisco, which enriches a few and leads to a whole host of other social problems. And where liberals try all sorts of idiotic and ruinously expensive government-run programs like public housing to try to address the problem rather than just relaxing zoning and permitting restrictions and just letting the market do it for free.

So in my mind it is not a question of socialism versus capitalism. It is a question of determining which areas of the economy are best addressed by the free market and which are best addressed through government intervention. Often the answer is that a combination of the two are needed. And, of course, the underlying issue is what do we actually value. Is it economic efficiency? fair distribution of resources? minimum human standards for all (health care, education, minimum wages, etc.) and so forth. Consequently government is always going to have some role in the economy because that is how the public expresses its values and priorities.